# Variance Buffers Guide

Variance buffers are Tillage's signature feature for protecting your profitability. This guide explains when and how to use them effectively.

## What Are Variance Buffers?

A variance buffer is a risk percentage added to each line item in your quote. It accounts for the uncertainty inherent in estimating creative and service work.

### The Problem They Solve

Common estimation challenges:
- Scope creep and "just one more thing"
- Client revision rounds
- Unexpected technical issues
- Miscommunication on requirements
- External dependencies and delays
- Learning curves on new technologies

Without variance, you absorb these costs. With variance, they're built into your pricing.

## How Variance Works

### Basic Formula

```
Line Total = Base Cost × (1 + Variance%)
```

### Example

- Service: Website Design
- Hours: 20
- Rate: $150/hour
- Base Cost: $3,000
- Variance: 20%

```
Line Total = $3,000 × 1.20 = $3,600
```

The extra $600 protects you if the project takes 24 hours instead of 20.

## When to Use Higher Variance

### 20-30%: Unclear Requirements

Use when:
- Client hasn't fully defined needs
- "We'll figure it out as we go"
- Multiple stakeholders with different visions
- First-time working with this client type

### 25-35%: External Dependencies

Use when:
- Waiting on third-party APIs
- Client providing content or assets
- Coordinating with other vendors
- Platform or tool limitations unknown

### 30-50%: Technical Complexity

Use when:
- New technology or framework
- Complex integrations
- Performance-critical requirements
- Security or compliance needs

### 40%+: High Uncertainty

Use when:
- Experimental or R&D work
- Vague "build something cool" briefs
- Aggressive timelines
- Client has history of scope changes

## When to Use Lower Variance

### 5-10%: Repeat Work

Use when:
- You've done this exact project before
- Using established templates
- Same client, same type of work
- Highly standardized deliverable

### 10-15%: Clear Scope

Use when:
- Detailed specification provided
- Fixed requirements (no changes)
- Simple, well-understood work
- Long-term trusted client

### 15-20%: Standard Projects

Use when:
- Typical agency project
- Reasonable client expectations
- Familiar industry and technology
- Some unknowns but manageable

## Variance by Project Type

| Project Type | Typical Variance |
|--------------|-----------------|
| Brand Identity | 15-25% |
| Website (template) | 10-15% |
| Website (custom) | 20-30% |
| Web Application | 25-40% |
| Mobile App | 30-45% |
| Marketing Campaign | 15-25% |
| Content Creation | 10-20% |
| SEO/Analytics | 15-25% |
| Consulting | 20-30% |
| Strategy | 25-35% |

## Variance by Line Item

Different parts of a project have different risk levels:

### Lower Variance Items
- Project management (predictable)
- QA and testing (defined scope)
- Training and documentation
- Maintenance retainers

### Higher Variance Items
- Custom development
- Design exploration
- Content strategy
- Third-party integrations
- New technology adoption

### Example: Website Project

| Line Item | Variance | Reason |
|-----------|----------|--------|
| Discovery | 10% | Defined process |
| Design | 25% | Creative iteration |
| Development | 30% | Technical unknowns |
| Content | 35% | Client-dependent |
| QA | 10% | Systematic process |
| Launch | 15% | Mostly predictable |

## AI-Suggested Variance

When using AI quote generation, Tillage suggests variance based on:

- Line item description keywords
- Project complexity indicators
- Industry standards
- Historical patterns

You can accept or adjust the suggestions.

## Variance Display Options

How clients see variance:

### Hidden (Recommended)
- Client sees final price only
- Variance built into total
- Cleanest presentation

### Blended
- Variance absorbed into unit price
- Shows adjusted rate
- Professional appearance

### Visible (Rare)
- Full breakdown shown
- Used for transparency requirements
- Some government/enterprise clients

Most agencies use hidden variance.

## Combined with Profit Margin

Variance and profit margin work together:

```
Base Cost × (1 + Variance%) × (1 + Profit Margin%) = Final Price
```

### Example

- Base: $1,000
- Variance: 20%
- Profit Margin: 15%

```
$1,000 × 1.20 = $1,200 (with variance)
$1,200 × 1.15 = $1,380 (final price)
```

## Setting Default Variance

In Settings > Quote Defaults:
- Set your standard variance (e.g., 15%)
- Applied to new line items automatically
- Adjust per item as needed

## Tracking Variance Accuracy

Over time, track:
- Estimated vs actual hours
- Projects that went over
- Projects that came in under

Refine your variance rates based on real data.

## Common Mistakes

### Too Little Variance
- Eating costs on every project
- No buffer for surprises
- Burning out on "small" requests

### Too Much Variance
- Pricing yourself out of work
- Clients question high prices
- Losing competitive bids

### Inconsistent Application
- Some items buffered, others not
- Random variance percentages
- No system or rationale

## Best Practices

1. **Always include some variance** - Even "simple" projects have unknowns
2. **Be systematic** - Use consistent rates for similar work
3. **Adjust per item** - Not all tasks have equal risk
4. **Review regularly** - Update based on actual project outcomes
5. **Document your reasoning** - Remember why you chose each rate
6. **Don't apologize** - Variance is professional risk management

## Communicating to Clients

If asked about pricing:
- "Our pricing includes a buffer for revisions and refinements"
- "We've factored in typical project contingencies"
- "This ensures we deliver quality without surprise costs"

Avoid:
- Calling it a "risk buffer" (sounds negative)
- Explaining the exact percentage
- Apologizing for including it

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*Related: [Profitability Features](/llms/features/profitability.txt) | [AI Quoting](/llms/features/ai-quoting.txt) | [Formulas Reference](/llms/reference/formulas.txt)*